THE Reserve Bank has held the cash rate at a record low 1.0 per cent and downgraded its economic growth and inflation forecasts.
The decision to leave the rate unchanged at Tuesday’s August board meeting had been widely predicted by economists, but many still expect another cut before the end of 2019.
The RBA reduced rates by 0.25 percentage points in both June and July in a bid to help kick-start economic growth.
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RBA governor Philip Lowe said for a second straight month the bank would adjust again “if needed”, which in July was widely interpreted as the central bank adopting a short-term watching brief.
Dr Lowe said the RBA now expected inflation to miss the central bank’s previous forecast of 2.0 per cent in 2020, and for GDP to grow by 2.5 per cent in 2019, compared to the 2.75 per cent previously expected.
It will formally update economic forecasts in Friday’s statement on monetary policy.
BIS Oxford chief economist Dr Sarah Hunter said the RBA was unlikely to raise the cash rate until its inflation threshold had been breached.
The Australian dollar spiked briefly after the central bank’s announcement but settled to 67.83 US cents by 1445 AEST.